Partner cuts pay off as Nabarro posts modest PEP rise

Nabarro’s average profit per equity partner (PEP) has risen 4.4 per cent after the firm admitted earlier this year that it had been “actively managing the partnership” to boost that figure.

Simon Johnston

Average PEP at Nabarro for the 2011-12 financial year was £332,000, up 4.4 per cent on 2010-11’s £318,000. That figure is still some way off the 2007-08 high of £600,000.

Earlier this year Nabarro announced that its turnover for 2011-12 was up by less that 1 per cent on 2010-11, rising from £112.6m to £113.4m. At the same time the firm’s senior partner Simon Johnston admitted that the firm had been cutting equity partner numbers in a bid to boost average PEP numbers (28 May 2012).

At the time Johnston said: “In common with other firms, we’ve had to make some difficult decisions because of the ongoing economic uncertainty and, of course, some partners have left who we would rather have stayed. However, as part of a more active approach to our strategic priorities and on the back of our results, we’ll continue to invest in our partner and fee-earning teams.”

As a result the firm had 14 fewer equity partners at the end of the 2011-12 financial year than it did at the same point in 2010-11, with the number falling from 87 to 73.

The firm has also released its equity spread for the 2011-12 financial year, with the top of equity receiving £513,000 and the bottom receiving £204,000.

It is clear that Nabarros are not having a good time and have been in decline for a while but surely part of making proper plans is to shrink the partnership by getting rid of dead wood that drags down profitability.

It is naive to think this should not form some part of the plan to turn things around.

It should not be the only plan, but in all modern law firms, which are multi million pound businesses, they have to prune the partnership in order to survive if they are underperforming.

The big problem is that politics and personalities are often the deciding factors in who is ejected from the equity or the partnership rather than contribution and importance to the business. I have no idea whether Nabarros got this bit right.